Omaha March 21, 2012

The mission of Strong Towns is to support a model for growth that allows America's towns to become financially strong and resilient.

Curbside Chat BIG Concepts 1. The current path cities are on is not financially stable. 2. The future for most cities is not going to resemble the recent past. 3. The main determinant of future prosperity for cities will be the ability of local leaders to transform their communities.

Macro Trends - Housing

Commercial Real Estate

Retail: A glut of excess space Between 1990 and 2005, consumer spending per capita rose 14% (inflation adjusted), yet retail space per capita rose 100%. We have six times the retail space per capita of any European country. Vacant retail space is up 42% since Source: Redfields to Greenfields

Mechanisms of Growth Can we grow our way out of this? The “Mechanisms of Growth” we have used during the modern era: Government Transfer Payments Federal/State Transportation Spending Debt, both private and public The Growth Ponzi Scheme

Gov’t Transfer Payments

Federal Transportation Spending

Private Sector Debt

Growth Ponzi Scheme Revenue from new development….. …is used to pay for existing liabilities. The “pain free” solution: New Growth

Growth Ponzi Scheme Investment in the community…. …creates new growth… …which increases property tax revenue. Strong Incentives Initial cost to the public for new growth: minimal Benefit to the public budget for new growth: substantial The catch is that the public agrees to maintain the improvement forever. Strong Incentives Initial cost to the public for new growth: minimal Benefit to the public budget for new growth: substantial The catch is that the public agrees to maintain the improvement forever.

Growth Ponzi Scheme The critical assumptions to this strategy: 1. Either growth continues at ever accelerating rates, or 2. The pattern of development ultimately generates more revenue than it costs to maintain.

Local Street Project Road Improvement Project $6,600 cost per property 50% of costs assessed 37 years to recoup public contribution from adjoining tax base Road Improvement Project $6,600 cost per property 50% of costs assessed 37 years to recoup public contribution from adjoining tax base

Local Road Rehabilitation Road Maintenance Project $354,000 total cost 79 years to recoup public expense from tax base To break even requires a 46% increase in property tax rates Road Maintenance Project $354,000 total cost 79 years to recoup public expense from tax base To break even requires a 46% increase in property tax rates

Local Road Project Road Improvement Project Costs to be 100% assessed (no public cost) Long-term maintenance paid by the public $154,000 estimated long-term maintenance cost $79,000 estimated long-term revenue from served properties To break even requires a 25% increase in property tax rates Road Improvement Project Costs to be 100% assessed (no public cost) Long-term maintenance paid by the public $154,000 estimated long-term maintenance cost $79,000 estimated long-term revenue from served properties To break even requires a 25% increase in property tax rates

Industrial Park Investment Sewer and Water Extension $1.9 million total cost 25 lots served $76,640 per lot $8 million of new commercial/industrial development needed immediately to break even Sewer and Water Extension $1.9 million total cost 25 lots served $76,640 per lot $8 million of new commercial/industrial development needed immediately to break even

Industrial Development Industrial Park Development $2.1 million inflation-adjusted total cost $6.6 million in improvements induced Payback from current conditions happens in 29 years if all revenue devoted only to debt Industrial Park Development $2.1 million inflation-adjusted total cost $6.6 million in improvements induced Payback from current conditions happens in 29 years if all revenue devoted only to debt

Small Town Wastewater System Sewer Rehab Project $3.3 million total cost $26,830 per Backus family Median household income: $26,875 Sewer Rehab Project $3.3 million total cost $26,830 per Backus family Median household income: $26,875

Investment in New Growth Harbor Rehabilitation Project $9 million dredging and infrastructure project $4.2 million additional for infrastructure rehab Total investment of $45,000 per family Payoff in 71 years – if all $32 million in new development happens immediately Harbor Rehabilitation Project $9 million dredging and infrastructure project $4.2 million additional for infrastructure rehab Total investment of $45,000 per family Payoff in 71 years – if all $32 million in new development happens immediately

Growth Ponzi Scheme

Private Sector Debt

Implications Serious implications for the future The “Mechanisms of Growth” we have become accustomed to are waning. Local governments are going to be forced to absorb the local costs of the current development pattern. This can’t be done in the current pattern of development without large tax increases and/or large cuts in services.

Future Risks and Volatility Fuel Prices Interest Rates Currency Fluctuation Black Swan Event

The New Economy 1950’s – 1980’s: Emphasis on growth through savings and investment. 1980’s – 2010: Emphasis on growth through debt accumulation. New Economy: Emphasis on building resiliency.

What’s the solution?

Strategies Don’t double down.

Strategies Adopt strategies to increase the public’s Return on Investment for infrastructure Low Amenity Area High Amenity Area

High Return Investments

$1,136,500 $803,200

Placemaking Principle Within neighborhoods and urban areas, a Strong Town uses complex streets to equally accommodate the full range of transportation options available to residents.

Del Prado Blvd Cape Coral Length: 2.6 miles Cost: $42 million $3,059/ft

Placemaking Principle A Strong Town utilizes a system of interconnected parks and civic structures to provide value to property owners within the community.

Placemaking Principle Parks, greens, squares and civic buildings provide value when they enhance the public realm, create memorable landscapes and provide for spontaneous gatherings.

Placemaking Principle A Strong Town requires age diversity in order to sustain itself. Designing neighborhoods for safe, independent living at all stages of life is critical for a Strong Town.

Curbside Chat BIG Concepts 1. The current path cities are on is not financially stable. 2. The future for most cities is not going to resemble the recent past. 3. The main determinant of future prosperity for cities will be the ability of local leaders to transform their communities.

How you can help us… 1. Read, listen and watch our stuff. Put it to work. Pass it on. 2. Sign up and fill out a survey we send you. 3. We are a 501(c)3 funded by donations. 4. Work to build Strong Towns.